I'm an associate editor at Forbes, part of the team responsible for our signature issues: The Forbes 400, Global Billionaires and America's Richest Families. As a writer, I cover these wealthy business builders as well as other entrepreneurs. Before Forbes, I also reported on entrepreneurs for Inc. magazine, and attended Syracuse University's S.I. Newhouse School of Public Communications.

To start, a test. A stranger offers you either a check for $1 million today or a penny that will double daily for a month. Which do you chose?

It would be wiser to take the visage of Lincoln than the stack of Benjamins. True, Option 2 leaves you with just a bit more than a dollar after a week. Day 14: $163. Day 21: $21,000. But by dawn six days later, that sum reaches $1.3 million. Lincoln indeed pays off in the end. He yields a grand total of $10.7 million.

A nice chunk of change. It also happens to be what Mark Trautman, co-manager of the AMF Large Cap Equity fund, recently taught his daughter’s seventh-grade math class. “Obviously, it’s a trick question, but when you start to go through the math, it’s very intriguing,” he says. It illuminates a strategy that any investor can adopt and one most should, save only those intimately familiar with the high-speed machinisms that propel Wall Street traders. “It’s the argument of protecting your capital during declines, which enables you to move forward in the up periods of the market.”

Trautman’s fund borders on ancient. Started in 1953, an initial investment of $10,000 would now be worth $3.3 million. For contrast, Morningstar‘s large-blend category would have averaged a $1.8 million stake. AMF Large Cap has performed well recently: Trautman and co-manager John McCabe scored a 8.2% return in 2011 and just a 28.5% loss in 2008, versus a 1.3% and 37.8% loss, respectively, among peers. “I think when the fund was founded many, many years ago, they had the same ideas we do,” Trautman says. He and McCabe began managing the fund in 1993. “It’s a lot easier to get wealthy slowly than it is to look for the hot stock of the day, because then what do you do?”

FORBES spoke with Trautman to gain greater insight on his investment strategy and where the fund is positioned today. Edited excerpts of the conversation:

FORBES: How do you conduct investments?

Trautman: We’re looking for high quality stocks, with steady earnings and dividend growth over time. Mega caps tend to be the type of company we invest in, the tried-and-true blue chips. That’s what the fund did to start, and that’s the approach we maintain today.

FORBES: What’s the key to narrowing your investment universe?

T: We like to point out that 90% of our portfolio falls in the top investment-grade category given by S&P. While the S&P 500 index contains only 45%. We’re really in the far right spectrum of the quality characteristics.

We’re looking at non-cyclical sectors of the market. We’ll have a much larger concentration in consumer staples. We put about 22% of our assets there, compared to the index average of 11%. Those are the types of businesses that we think can provide good dividend and earnings growth. But when consumer staples lag, we lag. When they outperform, we do too.

FORBES: Seems like a fund for investors who want to sleep soundly at night.

T: If you wake up in the morning and you go through the portfolio, you’re very comforted by the names that are there. You’re not going to get shaken out during difficult times. People are still going to drink Coca-Cola. They’re still going to go to McDonald’s. They’re going to buy goods at Wal-Mart.

It’s the type of fund that you can really stick with during difficult times and let that compounding machine really work to your advantage and be committed to the strategy for many, many years.

FORBES: What is your investment horizon?

T: We’re looking for businesses that we could potentially own for a decade or more. Actually, in the portfolio, I think we have about 12 stocks that we’ve owned for 10 years (we own about 30 stocks total). We look to own securities for decades. In that case, you’re probably best looking for businesses that are going to see earnings growth of 8% to 10% over a decade and today get a dividend bonus: a 2% to 3% yield. Those yields are readily available in the market today.

FORBES: Talk about the fund’s concentration.

T: We really don’t invest more than 5% in any one name, and we like to have at least 1.5% in a name. That lets each security have the opportunity to contribute to the fund’s performance. We’re underweight energy and slightly underweight health care. We like industrials—and consumer staples, like I said.

FORBES:Does a valuation play a big role in decisions?

T: Our best case scenario is buying a stock as a discount, getting a decent dividend return and potentially seeing that discount close. We’re not as concerned about price/earnings ratios as some managers. We focus more on the earnings yield. We’re looking for managers who are long-term focused and worried about how their capital expenditures will play out in the next five, 10 years. We really do pay close attention to capital expenditures and free-cash flow because that’s a factor in the sustainability of a company’s dividend.

All of our stocks pay a dividend, except for Berkshire Hathaway, which we think is capable of reinvesting its capital and free-cash flow in a wise way. We’re comfortable not receiving a dividend from that company.

FORBES: Can you give us a stock pick?

T: I think throwing out a specific stock pick is not necessarily the best thing for an investor. I think investors should think in terms of portfolio. Here’s a portfolio I suggest:

McDonald’s, a great company with a 3% or more dividend yield and attractively valued. Walt Disney, a fine entertainment company benefiting most from its ESPN cable network. Wal-Mart and Coca-Cola. In energy, I would pick Exxon Mobil. It’s very long-term and shareholder-oriented; it buysback a ton of stock. For financials, I like Wells Fargo because it runs like a more traditional bank. Industrials: I’d chose United Technologies and 3M. They complement each other nicely because of their opposing product cycles. I’d do IBM for technology. And I’d buy Berkshire; at 1.7 times book value, it’s fairly valued.

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